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GM takes the Hyundai road

Here’s a true story. Back in 1992, I took my ‘85 Pontiac Grand Prix to a transmission shop because it was shifting like a cheap lawn tractor. Mind you, the transmission had already been replaced a couple of years before. The mechanic took it for a spin, told me I’d need to replace or rebuild the tranny for about $600. Then led me into the garage. Up on lifts were a couple other Grand Prix and I think a Chevy Monte Carlo. They were essentially the same car. “Your transmission is putting my kids through college,” the mechanic told me with a curious blend of satisfaction and disgust.

After that, I abandoned GM. I bought a new but troublesome ’93 Ford Ranger pickup a few months later. After it gave me plenty of trouble, I eventually ditched Detroit altogether. I drive a Mini Cooper S today. What’s even sadder than my tale of woe is the fact that a big chunk of the letters I get from readers are just people whining about bad experiences with their American cars.

Those tales and letters are exactly why GM announced Sept. 6 that the company will offer extended warranties of five years and up to 100,000 miles for the engine and transmission on 2007 model years vehicles. Hyundai did something similar back in 1998 and still offers great warranties. GM has different brand issues than Hyundai did back then. But the reason for offering these deals is the same. Both companies are trying to overcome bad reputations for quality and get noticed by consumers who don’t even consider their brands.

It makes a lot of sense. GM has been climbing up J.D. Power’s initial quality rankings for about five years. Warranty costs have fallen 40% during that time, says sales GM sales boss Mark LaNeve. But consumer surveys show that buyers still think GM ranks near the bottom in quality. Chairman and CEO Rick Wagoner said at the press conference that the perception gap is still a big challenge.

Here’s another problem. GM’s quality is much better. In some cases it’s better than the Japanese companies like Nissan and Subaru that coast on a great reputation even when their cars turn up glitches. But GM has, at best, reached parity in quality with chief rivals Toyota and Honda. And in long-term testing, which measures cars made three to five years ago, GM still isn’t on par with those two vaunted carmakers. The bottom line is that GM still hasn’t given loyal Toyota Camry and Honda Accord owners a reason to trade up. Wagoner conceded that better quality, paired up with catchy styling and better value in other ways will accomplish that mission.

That’s why GM needs to do something like this. It proves the company is will to back up its claims of better reliability with its own cash. And it offers value to buyers who think they’re already getting a great deal in a foreign car.

This ploy won’t turn droves of buyers toward GM dealerships overnight. But it worked for Hyundai. It could work for GM.